Credicorp (BAP) has unfortunately pivoted toward a “good house in a bad neighborhood” story since my last update on this leading Peruvian bank, with the election of leftist Perú Libre (“Free Peru”) candidate Pedro Castillo roiling the market in Peru and leading foreign capital to bail out.
While Castillo has tried to walk back some of his more inflammatory campaign rhetoric, he did campaign on an explicitly Marxist platform that included advancing a new constitution, eliminating Peru’s Supreme Court, nationalizing some businesses/industries, and renegotiating state contracts. What that all will mean for Credicorp’s business and operating environment is anybody’s guess; Castillo’s party has relatively modest power in Peru’s Congress, the election was close, and his cabinet was approved by a relatively narrow margin (73 to 50), and that could limit what he can accomplish.
For Credicorp, I still believe that over 7% long-term core growth is attainable, and that would normally support an attractive return potential at this price, as would the near-term ROE outlook. While there is still double-digit upside after applying a larger discount rate to account for the elevated political/operating risk, this is a name suitable only for aggressive investors willing to take the risk that Peru will still fare relatively well under this new regime.
Read the full article here:
No comments:
Post a Comment